Govt urged to deliver on LISC and SG

26 November 2013

| By Mike |

Retaining the Low Income Superannuation Contribution (LISC) could add 20 per cent to the superannuation balance of those earning just $37,000 and aged 30 who will retire at age 65, according to a submission to the Senate Committee reviewing the impact of the removal of the Minerals Resource Rent Tax (MRRT).

The submission, filed this week, also called for the Government to deliver the increase in the superannuation guarantee (SG) in line with the timetable of the former Labor Government, claiming that a pause could cost fund members up to $10,000.

However it said that the LISC currently benefits 3.6 million Australians on low and modest incomes, including 2.1 million women.

"It benefits around 30 per cent of workers, who in 2009-10 only received around 1.2 per cent of total superannuation concessions," it said. "The introduction of the LISC nearly doubled the amount of tax assistance for persons earning less than $37,000 a year.

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"For a person earning just $37,000 a year, aged 30 and retiring aged 65, if the LISC applied over their working life it would boost their superannuation balance, in today's dollars, by around 20 per cent, from $200,000 to $240,000."

As well, an ASFA submission warned that not delivering the SG increase at all could cost fund members up to $100,000, with women particularly affected. Dealing with the Government's proposed pause in delivering the SG, ASFA said that in terms of the quantitative impact on individuals, for a person on $70,000 a year, around average full-time earnings, "the proposed pause leads to projected retirement savings after 35 years being around $10,000 lower (2.5 per cent), from $396,000 to $385,000".

"However, a pause has a much smaller impact on eventual retirement savings than not increasing at all — around $10,000 detriment to retirement savings after 35 years compared to nearly $100,000 detriment if the SG did not go to 12 per cent," the submission said.